HOUSE prices will end the year having risen by more than 10%, figures this week will show.

Nationwide building society’s index is set to show property-price inflation climbing into double figures for the first time since early 2005.

Nationwide, which will publish its figures on Thursday, has house-price inflation at 9.6% last month and insiders expect the upward momentum to have continued in the run-up to Christmas.

It will confirm the extent of the turnround in the housing market over the past 12 months.

A year ago, house-price inflation was only 3%, having come down rapidly from more than 20% in the middle of 2004, and there were warnings of an imminent crash.

In the first six months of the year price rises were modest, averaging only 0.5% a month. But the market strengthened significantly in the second half, with rises averaging more than 1% a month, driven by strong growth in London.

Most forecasters think prices will continue to rise during 2007, but at a slower rate than this year. Nationwide itself expects an increase of between 5% and 8%; Halifax predicts 4%; the Royal Institution of Chartered Surveyors and the Council of Mortgage Lenders expect 7%; and Capital Economics 3.5%. The London market should continue to benefit from record City bonuses in the early months of the year.

The most bullish forecaster is Lombard Street Research, which argues that house prices are more affordable than conventional measures suggest, and predicts a 15% rise in prices in 2007.

The housing market will be one factor that the Bank of England takes into account in deciding whether to hike rates further. On Friday, the Bank will publish figures for so-called mortgage-equity withdrawal in the third quarter.Equity withdrawal was £11.3 billion in the second quarter, amounting to 5.2% of households’ post-tax income, and is expected to have risen in the July- September quarter.

At a time when income growth has been squeezed — real disposable incomes in the third quarter were up by only 1.3% on a year earlier — people have been dipping into their housing wealth to finance spending.

Despite the upward pressures on house prices and fears about pay, the Treasury’s latest compilation of independent forecasts suggests Bank rate will end 2007 at roughly 5%, where it is today. The highest forecast for the end of 2007, from Beacon Economic Forecasting, is for 6%. The lowest, 4%, is from the economists at BNP Paribas.

According to a survey of analysts by Ideaglobal.com, a financial-research company, the Bank of Japan is seen as the central bank that is most likely to raise interest rates first in 2007, followed, with equal probabilities, by the European Central Bank and the Bank of England.

A further hike in interest rates by the Federal Reserve Board, America’s central bank, is seen as highly unlikely following recent evidence of subdued “core” inflation.